BIO Investor Conference: New Technologies, Old Pricing Systems, And Insurance Payers In The US

NEW YORK — At a recent biotechnology investors event in the United States, the prospect of repeal or redesign of the Affordable Care Act, the president’s recent remarks on the prospect of Medicare negotiating prices directly with pharmaceutical corporations, and the public debate surrounding high priced medicines, meant few panels were immune from questions of affordability, access and payment.

Biotech CEOs and investors met on 13-14 February at the annual Biotechnology Innovation Organization (BIO) CEO & Investor Conference in New York.

Numerous panels featured executives from biotech companies focused on gene therapies. During a panel on new approaches to value-based therapy payment models, speakers explained that these treatments offer a curative solution to illness, but raise questions of price and payment. The traditional model for pricing medicines is a fee per pill, but gene therapies, which offer a treatment for chronic illness with few or even a single treatment, question this model.

To this end, value-based pricing offers a payment structure based not upon volume of medication, but upon a drug’s efficacy and ultimate value to the patient, they said.

This value measurement goes beyond the simple equation of benefits minus costs. According to the speakers, value is subjective by patient, and may be relative to another product or treatment regime. The current US structure is also not designed to make payments to innovators for a one-time treatment.

In a panel discussion featuring several gene therapy innovators, one panelist, Sandy Macrae, president and CEO of Sangamo Biosciences in Richmond, California, discussed these concerns: “What we’re trying to do isn’t just about should you get the therapy, it’s should you get the therapy that if you take it, you’ll never need anything again, ever for the rest of your life.”

When asked whether the payers in the US system were ready for a value-based payment system, Roger Longman, CEO of Real Endpoints, based in Westport, Connecticut, said: “…in Medicaid, there’s no way that we are ready for this. And if we have block grants in Medicaid, there will be even less of a way that we are going to do this. If we’re talking about certain parts of Medicare, probably not, other parts, probably so. And in terms of commercial insurers, it’s a mixed bag.”

Macrae also related a story of two investors he had met with that morning. One investor pointed out that if you treat a patient in this way, you eliminate all of their future costs to treat the disease, while the other asked, if you treat this patient and solve the disease, where will your customers come from? He said he turned away the latter investor.

When discussing the current system of reimbursements to payers, Macrae continued: “It does need to be solved. Because in America, where even patients with rare diseases will move from healthcare group to healthcare group, they don’t care for their patient’s total life. They care for 3 to 5 years of the patient’s life, therefore they have no incentive to pay for a lifetime treatment when they’re only going to see 3 to 5 years of benefit.”

The benefits of de-linking prices from volume of sales is not only relevant to gene therapies. During a panel on designing clinical trials in the framework of the 21st Century Cures Act, Gregory Daniel, deputy director of the Duke-Margolis Center for Health Policy in Durham, North Carolina, discussed the challenges to make new antibiotics to treat antimicrobial resistance.

From the clinical side, new antibiotics are challenging to create,” said Daniel. Once one has been developed, physicians wait until it’s absolutely necessary to use it, as bacteria will begin to develop resistance as soon as exposed to the treatment. As the US pay-per-pill system links profits to volume sales, there is a dearth of investment in new antibiotics, for few investors are attracted to a model that restricts their return on investment during the first several years of the patent period.

Some provisions within the 21st Century Cures Act, signed by Congress in December 2016, offer incentives to increase research and development. For new antibiotic R&D, Limited Population Antibiotic Development, one provision within the Cures bill, allows the Food and Drug Administration to approve new antibiotics with smaller clinical trial data sets, decreasing the cost of bringing a drug to market.

A similar effort, the Generating Antibiotic Incentives Now Act of 2012, increases the exclusivity period for patented antibiotic medicines by up to 5 years. Neither of these measures, Daniel argued, are enough to generate the R&D necessary to create new antibiotics.

After mentioning numerous organisations around the world that have researched the issue of generating new antibiotics, Daniel explained: “What are most promising is a fundamental reform of how we reimburse antibiotics…. The way that [a] company makes revenue, and makes a return on investment for its products, is based on utilisation, volume utilisation, so the more drugs a patient uses, the more revenue a company gets. That’s not good for antibiotics and it’s not good for stewardship. One of the ideas that is very promising is a concept called “de-linkage”, where you essentially de-link the volume use of a drug from the revenue.”

The concept of de-linkage as discussed is essentially a value-based payment system, through which a company could receive their entire pre-determined price for a drug upon release or within the first few years, regardless of volume sold.

De-linkage is not contained in the 21st Century Cures Act, which Daniel acknowledged. The panel, which included a number of representatives from patient advocacy groups, did discuss one element of the bill that will have important implications for patents and patient access. Under the Cures Act, the FDA would be able to accept “real world evidence”, rather than clinical trials alone, as proof of a drug’s efficacy.

Jeff Allen, president and CEO of Friends of Cancer Research in Washington, DC, explained the concept: “There may be opportunity to increase the quality and utilisation of real world evidence, but it’s important to note that this isn’t a new concept. If you look at the field of oncology for example, and if you look at the frequency of accepted … off label uses for a drug, it’s well over 50 percent of the recommended uses for oncology products as measured by professional guidelines are not within the label of the drug.”

“This isn’t to say that the professional guidelines are recommending inappropriate uses,” he said. “They’re making the recommendations off of real world evidence and experience that some of these products could be applied in other scenarios.”

The implication of this, though not explicitly stated by the panel, is that existing drugs which have been tested for safety and efficacy for use in treating one disease, could be approved for new indications based upon their use by patients. Under the Hatch-Waxman Act, a new indication could provide a patent holder with an additional three years of data exclusivity, potentially delaying the entry of a generic competitor.

The 21st Century Cures Act seeks to ease the entry of new drugs into the market, and new technologies like gene therapy necessitate a change in how payers are reimbursed throughout the US health care system. The current US administration’s promised repeal of the Affordable Care Act (ACA or “Obamacare”) and the president’s stated support of negotiating prices of drugs covered by Medicare both could have wide ranging impacts on patients and patent holders.

During a panel on this topic, Jeanne Haggerty, senior vice president, federal government relations, at BIO in Washington, DC, responded to the president’s comments on negotiating drug prices within Medicare.

“President Trump has been very vocal about saying that it is ridiculous that Medicare does not negotiate for prescription drugs,” he said. “I think there’s been a lot of efforts to educate him that that’s not an accurate statement, that while the law technically says that the secretary of HHS [Health and Human Services Department] cannot negotiate, private insurance plans through Medicare Part D negotiate tremendously well, and actually get some of the best deals for Medicare beneficiaries that exist out there, sometimes well below what the commercial insurance markets actually receive.”

The panel also had a different perspective than the previously mentioned group on the changing role of the FDA in approving new drugs. While the Cures Act reduces the role of the clinical trials in approving drugs based upon efficacy, these panellists expressed that clinical trial data proving efficacy was the best way to encourage investment.

Not specifically commenting on Cures, but upon where the FDA is moving on safety and efficacy policy issues, Jonathan Leff, partner at Deerfield Management in New York said: “…The FDA as we know it, for the last 40 years, has been about regulating the efficacy as well as the safety of drugs. If that were to change, it would really mark a fundamentally different change in terms of how we think about developing drugs and marketing drugs in this country. From a biotech company point of view, and as a biotech investor, I’ll certainly tell you my bias, which is that a major change like that would have very, very negative, potentially disastrous consequences for biotech investment and biotech industry.”

A design of the future US health care system remains unclear, and no one wished to speculate to the point of making predictions on what a replacement of the ACA would look like.

Haggerty said that she did not believe that the Biologics Price Competition and Innovation Act, a piece of related legislation to the ACA, would be repealed.

Brian Rye, senior healthcare policy analyst, Bloomberg Intelligence in Washington, DC, looked to the last repeal effort as an indication that all related taxes, including the medical device tax and the tax on brand name drugs sold to government agencies, would be removed. It is yet unclear what a reform of the healthcare system means for reforms to the US system of paying patent holders, to account for new innovations or new ways of incentivising research. Bipartisan differences in the very concept of insurance may offer some clue as to what is next.

“There is a fundamental difference of opinion about what the term insurance actually means between the two parties,” Rye said. “Think about the Bernie Sanders plan, which got a lot of support. No copays … no nothing, you get everything for free. Whereas Republicans would look at that and say wait a minute, you don’t use your homeowner’s insurance to make your monthly mortgage payments. Insurance is to protect against catastrophic loss.”

Kim Treanor is an intern at Intellectual Property Watch and a student in the graduate program of International Affairs at the New School in New York, where she studies development, trade and public health.

 

Image Credits: Kim Treanor